Billing and collection
Introduction
Accounts Receivable, abbreviated as CC or CxC, are legally enforceable payment claims held by an organization. From an accounting point of view, there are two types of accounts receivable. The most common corresponds to those derived directly from the operations of the organization, generally for goods supplied or services "Service (economy)") provided that clients have received but have not paid in full. Likewise, there are non-commercial accounts receivable, which derive from various internal transactions of the organization, such as loans to employees and advances to employees, among others.[1].
The accounts receivable business process involves the subprocesses of customer onboarding "Customer (economics)"), invoicing, collections, deductions, exception management, and post-payment cash posting. They are usually in the form of invoices issued by a company and delivered to the customer for payment within a commonly agreed upon time frame.
Accounts receivable are presented on the balance sheet as an asset "Asset (accounting)").[2] It is one of a series of accounting transactions that deal with the billing of a customer for goods and services that the customer has ordered. These can be distinguished from notes receivable, which are debts created through formal legal instruments such as promissory notes or bills of exchange.[3].
Overview
Accounts receivable represent money owed by entities external to the organization for the sale of products or services on credit. In most business entities, accounts receivable is usually executed by generating an invoice and sending it to the customer, who, in turn, must pay it within a set period of time, called credit terms or payment terms.[4].
Organizations aim to collect all outstanding invoices before they are due. Thus, collection and cash teams are usually established as part of the department in charge of accounts receivable. While the collection team searches for the debtor and makes the payment due, the cash team carries out the accounting application of the money received. For organizations, it is key that the due dates of invoices are as short as possible, and to know the different formulas to make their collection effective, such as confirming and factoring.[5] Accounts receivable can impact the liquidity of the organization, so it is important to pay attention to these metrics. Consequently, the investment risk should be as small as possible.[6].